Category: Strategy

Back when Adam and I started Pardot in March of 2007, the original idea was to build a lead generation as a service product where we’d generate leads for technology companies and sell them to multiple vendors. For the business model, the goal was to spend $100 on Google PPC ads to generate one qualified lead (e.g. someone searching for the term “email marketing”) and we’d in turn sell that lead to five companies that fit the buyer’s needs for $50 each (so, turn $100 into $250).

Within six weeks we’d built a prototype system that managed simple landing pages and had light business rules to forward leads to different companies. Google happily took our money for AdWords ads and we ended up spending several thousand dollars to get our first batch of leads in the system. With leads in hand, we then went to technology vendors and said we had a few qualified leads for them at no-charge and that we’d like to setup a conversation to talk about our new business. Quickly, within a few conversations, it was clear that the technology companies were much more interested in the system to generate the leads than to buy leads from us. After much internal discussion over the course of a week, we decided to change the business to focus on building a marketing automation platform.

While we shifted our business to go from selling leads to selling software, we stayed in the same area of B2B lead generation. To me, this was an iteration in the startup and not a pivot since we could use the core of our existing technology and we continued to go after the same buyer (marketing managers). Here, the key takeaway is that the right strategy often reveals itself as more time is spent in the market, especially when getting honest feedback from customer interactions.

What else? What are some more examples of better strategies emerging after customer interaction?

While the Simplified One Page Strategic Plan is an amazing business tool to align the team and track the most important metrics, there’s still an opportunity to write out the strategy in greater detail, especially when things are more complicated or in flux. At Amazon.com, Jeff Bezos likes to start the executive meetings with 30 minutes of reading six-page memos prepared by each of the leaders. The idea is that long form writing captures more detail and nuance as compared to PowerPoint presentations, which often focus on numbers with limited color commentary.

Here are a few thoughts on writing out the strategy:

• Take each of the main ideas from the Simplified One Page Strategic Plan and write a paragraph explaining why it’s important and anything of note
• Consider the audience (e.g. all team members, just executives, etc.) and make sure the strategy is understandable and cohesive
• Review the written strategy with advisors and investors in advance of sharing it with other team members so as to get at least one round of feedback and advice
• Make the most important takeaway from the strategy document abundantly clear and memorable

Thoughtful prose adds more depth and context to the company’s strategy. When a Simplified One Page Strategic Plan isn’t enough, write out the strategy and share it.

What else? What are some thoughts on writing out the strategy?

Recently I was talking to an entrepreneur and I asked about his typical customer, sales cycle, and price point. Immediately, his eyes lit up and he talked about how he only wants to sell large deals — deals that are at least six figures, preferably mid-six figures. I drilled in further and learned as much as I could. Then, it dawned of me: entrepreneurs need to build products that have a price point inline with their personality style.

Here are a few thoughts on product price points and personality styles:

• Some entrepreneurs want to be out hunting whales and on the front line with the sales team, thus a very high product price point makes sense
• Some entrepreneurs want to have a large number of customers and employ an inside sales team with customer interaction over the phone, thus a moderate price point makes sense (typical for Software-as-a-Service products)
• Some entrepreneurs want a completely self-service sales process and product, thus a freemium model or easy-to-get started product makes sense

When evaluating business models, entrepreneurs would do well to take into account their own personality styles and the ideal product price point. Product price point drives a great deal of how the business works.

What else? What are some more thoughts on product price point personality parity?

Back in 2009 we tried to raise venture capital for Pardot. While we didn’t end up raising any money, we did pitch dozens of venture capitalists and had a great experience doing it. One of the things potential investors were most skeptical about was the market opportunity. Even though we had over $1 million in annual recurring revenue and customers said it was a must-have (a painkiller), investors didn’t think it was a big enough market opportunity. Now that the space has three unicorns (billion dollar companies), it’s clear the market is massive.

Here’s how we presented the market opportunity for marketing automation in 2009:

• Marketing teams don’t have a central platform to run their campaigns and track ROI (e.g. accounting has QuickBooks, sales has Salesforce.com, etc)
• B2B online marketing, while smaller than B2C online marketing, is growing fast and benefits from the shift in offline to online advertising
• Roughly 150,000 companies pay for a modern, web-based CRM (Salesforce.com, SugarCRM, Netsuite, and Microsoft Dynamics)
• The vast majority of companies that pay for a modern, web-based CRM need a marketing automation system, yet less than 3% of the market is vended (we cited publicly available customer counts from each CRM vendor and marketing automation vendor)

Thankfully, our market analysis proved to be correct and marketing automation is now a huge market that’s still growing fast.

The next time investors ask about the market opportunity, figure out how to present it in a way that’s compelling and incorporates social proof beyond something written in a Gartner report.

What else? What are some more thoughts on framing a market opportunity and the marketing automation example?

Earlier this week I finished Peter Thiel’s new book Zero to One (see my previous post Creative Monopolies on the Mind). My favorite part in the book is where he talks about the seven questions every entrepreneur needs to answer. He provides details for each question and then goes through a few example companies with one that can positively answer the majority (Tesla) and one that can’t (Solyndra).

Here are the seven questions every entrepreneur needs to answer:

1. The Engineering Question
   Can you create breakthrough technology instead of incremental improvements?
2. The Timing Question
   Is now the right time to start your particular business?
3. The Monopoly Question
   Are you starting with a big share of a small market?
4. The People Question
   Do you have the right team?
5. The Distribution Question
   Do you have a way to not just create but deliver your product?
6. The Durability Question
   Will your market position be defensible 10 and 20 years into the future?
7. The Secret Question
   Have you identified a unique opportunity that others don’t see?

While it isn’t critical to be able to answer every question in the affirmative, it is critical to answer a majority of the questions in the affirmative. One of my favorite lines from the book:

If you don’t have good answers to these questions, you’ll run into lots of “bad luck” and your business will fail.

Entrepreneurs would do well to answer these seven questions and revisit them on a regular basis.

What else? What are some more thoughts on the seven questions every entrepreneur needs to answer?

Continuing with yesterday’s post that CEOs Focus on Growth, not Execution, there are a number of strategies and ideas to implement when it comes to growth planning. Often, as a CEO, it’s easy to sit back and be reactive to the deluge of inbound requests, which never stop. CEOs need to be proactive.

Here are five ideas to focus more time on growth planning:

1. Develop a simplified one page strategic plan and build support for the three-year section
2. Run monthly strategy sessions soliciting growth ideas
3. Take a solo retreat and reimagine the future
4. Hire a business coach (pro athletes have coaches, why don’t more CEOs have them?)
5. Join EO or YPO and develop a peer group that is growth-oriented

Growth planning isn’t something that’s turned on and off of a regular basis. Rather, the best CEOs are always focused on growth and are constantly thinking about it.

What else? What are some more growth planning ideas?

Thinking more about the Notes from Sales Training with Jack Daly, the one idea that really stood out to me is that CEOs focus on growth, not execution. Since A Startup is a Scalable Growth-Focused Company according to Paul Graham, CEOs are tasked with leading the charge. Generally, people think of the CEO as setting the mission, vision, and values, making the hard decisions, and communicating the message relentlessly. But growth? I’ve never heard of growth in the CEO’s job description.

In the entrepreneurial circles, there’s a popular saying that we often spend too much time working in the business, not on the business. In this case, working in the business implies doing day-to-day tasks that are readily accomplished by someone else. That is, too much time is spent on execution. Instead, working on the business implies more strategic topics whereby the entrepreneur or CEO is the best person for the job. Most often, especially in startups, the goal of working on the business is to figure out how to grow faster.

CEOs and entrepreneurs that understand the importance of working on the business, and not in it, are focused on growth. The most successful CEOs have growth in their job description.

What else? What are some more thoughts on CEOs as focused on growth and not execution?

Several weeks ago an entrepreneur reached out and said he wants to sell his company. After having grown the business from nothing to a good size (> $10 million revenue) he’s tired and ready to move on to the next adventure. I’ve had a number of similar conversations over the years, and here are a few reasons entrepreneurs decide to sell their company:

• Boredom – The journey is the fun part, and when it’s no longer fun, it can be time to sell
• Financial freedom – Many entrepreneurs set out to make FU money — say $20 million — and when the first offer comes along that meets their goal, they sell
• Incredible offer – My favorite response to someone asking “is your company for sale?” is to answer “no, but how much are you offering?” such that sometimes an offer so incredible comes along that you can’t say “no” (this was the case with selling Pardot to ExactTarget)
• Industry shift – Technology moves fast and sometimes you’re on the wrong side of the curve, so it’s important to get out before things get even worse

Selling a company is a very personal and emotional decision. Deciding to sell is just the first step in a long process and there are many reasons to exit.

What else? What are some other reasons why entrepreneurs decide to sell their company?